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$35MM GODADDY TCPA SETTLEMENT EXPLODES (PART 2):”We Emphasize That We Think That the Sort of Strategy Employed by [GoDaddy and Class] Counsel has No Place in the Federal District Court.”
Wednesday, May 15, 2024

So yesterday I began breaking down the Eleventh Circuit Court of Appeal’s devastating ruling in Drazen v. GoDaddy.com 2024 WL 2122466, No. 21-10199 (11th Cir. May 13, 2024).

Read Part 1 here

In my prior blog I discussed the Appellate Court’s findings regarding collusion between the Class Counsel and GoDaddy’s lawyers and the insufficiency of the compensation paid to class members as compared to the amount of fees Class Counsel was set to receive.

This all culminated in the stunning determination that Class Counsel was not “adequate” to represent the class.

Today we focus on a separate but related piece of the ruling–the insufficiency of the notice provided to the class.

Importantly, the notice issues were not raised or briefed by the objector that brought the appeal. Normally that would mean the appellate court not consider those issues. However citing a rarely used exception for manifest injustice, the Appellate Court too it upon itself to protect the class and provide clarity to all. And it hammered Class Counsel and GoDaddy’s lawyers in doing so:

The District Court’s error in approving the settlement, “was of such magnitude, … particularly in the circumstances of this case,” in which it had a fiduciary duty to protect absent class members, “to have seriously prejudiced” absent class members’ ability to make an informed decision about the settlement. And when we consider GoDaddy and Class Counsel’s tactic to rush the settlement and obtain an overly broad release of the Class Members’ claims, “we are convinced that substantial injustice has been done in this caseWe emphasize that we think that the sort of strategy employed by [GoDaddy and class] counsel has no place in the federal district court.”

My goodness.

I have never seen a sterner condemnation of counsel conduct by an appellate court. This is just awful for the law firms involved. Very embarrassing.

The Drazen court was particularly concerned regarding the rights of class members to be informed of “the claims, issues, or defenses” involved in the action as required under Fed. R. Civ. P. 23(c)(B)(iii). (While written in the disjunctive, the Court interprets the provision to require the class members to be informed of all claims, issues AND defenses.)

The Court found the notice failed to inform class members of two key facts:

  • The notice failed to reveal that the claims could allow Class Members to potentially recover $500 for each phone call or text message made to each Class Member’s cell phone, or $1,500 if made willfully or knowingly; that the class consisted of over 1.26 million members; and that GoDaddy’s liability exposure was more than $600 million;
  • The notice failed to advise class members of the pending Facebook decision which was handed down just two months after the settlement was approved. The Supreme Court’s Facebook ruling decided the ATDS issue–which was the central issue involved in the litigation.

The second piece really frustrated the Appellate Court. In a stark rhetorical flourish reminiscent of Victorian literature the opinion probes the reader: “Can there be any doubt that the District Court’s failure to inform the Class Members [about Facebook] denied them due process of law?”

There are a couple of key take aways from this portion of the decision.

Most basically, class notice needs to inform class members of all the key pieces of the TCPA puzzle. Most important class members need to be advised of the amount of exposure potentially facing a TCPA defendant. But they also must be informed of weaknesses in their case–especially something major like a pending Supreme Court decision.

While this makes sense when you say it out loud, it is actually entirely new legal doctrine. Most class notice paradigms merely advise the class member about the applicable law in the abstract, not the specific impact of the law on a potential Defendant or pending potential changes to the law. So I do not fault the parties here (or the district court) for failing to recognize the broader nuanced obligations the Eleventh Circuit imposed.

Where I perhaps do fault counsel–and where the Eleventh Circuit was absolutely pissed–was in the “race against the clock” approach to the settlement here.

In the Eleventh Circuit’s view both GoDaddy and Class Counsel–who were colluding, remember?–new about Facebook. And the only way for Class Counsel to get their $7 or $10MM bucks and for GoDaddy to get its crazy overbroad release was for this settlement to be approved before the Facebook ruling was handed down. (I am paraphrasing the court’s findings here, not independently suggesting wrongdoing by anyone.) So, in the appellate court’s view, the parties inappropriately rushed the district court for approval without properly alerting class members regarding their rights in the hopes to bind as many of them as possible.

This was the “tactic” the appellate court found had no place in federal district court. And it is really something for folks to think about.

On the one hand I cannot fault Class Counsel for trying to get something for the class ahead of Facebook. One can certainly argue that a class member receiving $35.00 is better than a class member receiving $0.00, which is probably what they would have received.

So what, the argument goes, is the harm here?

I suppose the harm is to the rule of law and the basic precepts of due process. And I respect that form-over-function utilitarianism. My brain is wired just that way. So I am aligned here.

More to come on this decision tomorrow.

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